18 Share Tips – 14th October 2024

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John Athanasiou, Red Leaf Securities

BUY RECOMMENDATIONS

BUY – Platina Resources (PGM)

Junior gold explorers often face challenges in securing sufficient working capital to advance their projects, particularly in a tight capital market. Consequently, it can result in junior companies being undervalued compared to established gold producers. However, Platina Resources stands out as our preferred gold exploration company due to its strong financial position and promising assets. With about $13 million in cash on hand, Platina is well capitalised to fund its exploration activities without immediate need for external funding. Its experienced management team is focused on developing projects in highly sought after gold jurisdictions in Western Australia, providing strategic advantages in the competitive exploration landscape.

BUY – Raiz Invest (RZI)

Raiz provides an online mobile investment platform. RZI has achieved positive cash flow while growing its funds under management to $1.5 billion, which is supported by a base of more than 300,000 active customers. A new strategic relationship with State Street Global Advisors positions RZI to generate further growth in funds under management as it continues to expand in the digital wealth management space.

HOLD RECOMMENDATIONS

HOLD – Sigma Healthcare (SIG)

Shares in Sigma recently surged after making concessions aimed at alleviating Australian Competition and Consumer Commission (ACCC) concerns regarding its proposed $8.8 billion merger with Chemist Warehouse. If the ACCC approves the merger, Sigma is likely to experience a re-rating, potentially boosting its valuation. However, we recommend holding the stock until the ACCC reaches a decision.

HOLD – Woodside Energy Group (WDS)

Woodside is a leading tier one oil and gas producer. The recent escalation of the Middle East conflict has led to significant uncertainty regarding crude oil prices. In light of this geopolitical instability, we recommend holding the stock until clearer signs emerge of market conditions returning to a stable outlook.

SELL RECOMMENDATIONS

SELL – DroneShield (DRO)

The company provides artificial intelligence based platforms for protection against advanced threats, such as drones and autonomous systems. The shares have risen from 38 cents on January 2 to trade at $1.28 on October 10. First half revenue from continuing operations rose 108 per cent in 2024 when compared to the prior corresponding period. But the company’s net loss was up 64 per cent. In our view, the stock is overvalued, with the market pricing in too much optimism. We see better opportunities elsewhere.

SELL – Qantas Airways (QAN)

Qatar Airways Group recently announced it intended to acquire a 25 per cent equity stake in Virgin Australia. If the Foreign Investment Review Board (FIRB) approves the proposal, the domestic aviation market in Australia could become significantly more competitive. Heightened competition may lead to a price fare war with Qantas, potentially putting pressure on its profit margins. Given the uncertainty, it may be prudent to take some profits in Qantas until the FIRB reaches a decision.

Arthur Garipoli, Seneca Financial Solutions

BUY RECOMMENDATIONS

BUY – Mineral Resources (MIN)

The share price of this leading commodity stock has fallen from $79.49 on May 20 to trade at $50.12 on October 10. Softening iron ore and lithium prices contributed to the fall. MIN recently sold a 49 per cent interest in its Onslow iron haul road to Morgan Stanley Infrastructure Partners for $1.1 billion. MIN will receive an additional $200 million as a deferred cash settlement if tonnage conditions are met. The cash payment enables the company to reduce debt. Also, cost cutting measures have eased concerns among some investors. The stock is well placed for potential upside in iron ore and lithium prices.

BUY – Woolworths Group (WOW)

The Australian Competition and Consumer Commission (ACCC) announced in September 2024 that it had started separate proceedings in the Federal Court against supermarket giants Woolworths and Coles. The ACCC claims Woolworths and Coles had allegedly breached Australian Consumer Law by misleading consumers through discount pricing claims on hundreds of common supermarket products. Woolworths announced on September 23, 2024, that it would carefully review the claims made by the ACCC and continue to engage with the ACCC. Coles announced on September 23, 2024, that it intends to defend the proceedings. A final ACCC report will be released by February 28, 2025. It appears earnings and valuation risks are now priced in to WOW. In our view, this stock suits the longer term investor.

HOLD RECOMMENDATIONS

HOLD – Sims (SGM)

This global metal recycler recently provided guidance on its expected performance in the first quarter of fiscal year 2025. Its North American business continues to improve and is expected to deliver increasing earnings before interest and tax and higher margins. SGM is expected to operate more efficiently post the cost cutting programs and sale of its UK division.

HOLD – Reliance Worldwide Corporation (RWC)

The performance of this global plumbing supplies company has improved in the UK and US in response to more home repairs and renovations. Consumer sentiment has also improved on interest rate cuts. Forecasts of more interest rate cuts moving forward should result in an uptick in building volumes.

SELL RECOMMENDATIONS

SELL – Guzman Y Gomez (GYG)

GYG is a Mexican themed restaurant chain. Shares were issued in the initial public offering at $22 and the company listed on the ASX on June 20, 2024. The stock was recently included in the S&P/ASX 200 index, which pushed the shares to a closing price of $42 on September 11, 2024. The stock price has exceeded the forecasts of most analysts. GYG expects to open another 31 restaurants in fiscal year 2025. With an ambitious store expansion profile, we believe the valuation is stretched. It may be prudent to take a profit at current levels. The shares were trading at $38.70 on October 10.

SELL – Fletcher Building (FBU)

Fletcher is a building products manufacturer. It’s also a home builder. The company operates in New Zealand and Australia. FBU recently undertook a capital raising, seeking $NZ700 million to strengthen the company’s balance sheet and improve financial resilience. While the capital raising reduces risk, FBU still faces challenges based on a tougher and competitive economic environment.

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BUY RECOMMENDATIONS

BUY – BHP Group (BHP)

The global miner has strong exposure to copper and iron ore. We’re forecasting increasing demand for copper to lead to a supply deficit out to 2030. BHP is a relatively low cost iron ore producer. So, any sustained stimulus from China and an emerging India should, in turn, support iron ore prices moving forward. Although BHP’s share price has risen since late September, there is sufficient room for more upside as at October 10.

BUY – Boss Energy (BOE)

Boss is an Australian based uranium producer. We’re bullish on demand for uranium given it generates low carbon power. The artificial intelligence boom is driving increasing demand for power from data centres. Demand for electric vehicles will also require further investment in baseload low carbon power.

HOLD RECOMMENDATIONS

HOLD – Vertex Minerals (VTX)

Vertex is developing the Hill End gold projects in New South Wales. The Hill End projects are located in the highly prospective Eastern Lachlan Ford Belt. The region has produced some of the highest gold grades in Australia. VTX has other gold assets in the Eastern Goldfields of Western Australia. If VTX can increase its mining reserves, project economics will grow materially.

HOLD – Sandfire Resources (SFR)

Sandfire is one of the few pure play copper producers on the ASX. The company generated sales revenue of $US935 million in fiscal year 2024, up 16 per cent on the prior corresponding period. It delivered a 47 per cent increase in copper equivalent production. It posted an underlying loss of $US5 million. However, it was profitable in the second half of fiscal year 2024, with underlying earnings of $US31 million.

SELL RECOMMENDATIONS

SELL – ANZ Group Holdings (ANZ)

Shares in the ANZ have risen from $25.99 on January 2 to trade at $30.545 on October 10. Cash profit in the first half of fiscal year 2024 was down 7 per cent on the prior corresponding period. Revenue was down 2 per cent. It may be an opportune time to lock in some profits given a subdued Australian economy at a time of higher interest rates.

SELL – Mirvac Group (MGR)

Mirvac develops residential, office and industrial properties. The company expects lower earnings in fiscal year 2025 in response to an anticipated lower contribution from its development business and higher net interest costs related to development activities. We remain cautious about real estate listed stocks in a challenging sector. Other stocks appeal more at this stage of the cycle.

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The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing. Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.